The next crucial resistance is placed at 11,171, but before that it could face some pressure around 10,950 levels
The Sensex reclaimed Mount 36K on Tuesday and the Nifty climbed the 10,900 mark for the first time since February. Bulls seem to have taken control over D-Street as the index has managed to surmount the wall of worries. Experts feel it is now poised to hit fresh record highs, which might come in July itself.
The index witnessed a breakout above 10,930 which was the intraday high recorded on the day of Karnataka election result. The next crucial resistance is placed at 11,171, which is the record high formed in January, but before that it could face some pressure around 10,950 levels, they stated.
The Nifty registered a decisive break out above 10,930 by shrugging off the last 8 weeks of rangebound trade with a strong gap up opening. Experts said the market has now turned from a sell on rallies market to buy on dips markets.
It has brushed aside 3 key risks: 1) Rising trade war concerns; 2) Depreciating rupee against the dollar which has now stabalised; and 3) Rise in crude oil prices. After trading in a narrow range for most part of June, the index did breakout from the 10,650-10,850 range. It hit a low of around 10,550 and then bounced back swiftly to reclaim 10,900 levels this week.
So, what is in store for the markets going forward?
“New highs looks inevitable for the index. Once we manage to sustain above 11,171 levels, then the Nifty should hit 11,500 by year-end with a 100-point deviation on either side. Our long-term charts suggesting that the correction that was in progress from its lifetime high of 11,171 appears to have culminated at recent lows placed around 10,550 levels. In Elliot wave parlance, this correction is looking like a wave 4 of lower degree inside a long term bull market,” Mazhar Mohammad, Chief Strategist – Technical Research and Trading Advisory, Chartviewindia.in, said.
Once this ends, he sees the Nifty retesting its lifetime highs. “This leg of upmove should be strong as it is coming after a pause of two months. Hence, we will not be surprised if indices hit new lifetime highs sometime in August.”
VK Sharma, Head Private Client Group and Capital Market Strategy at HDFC Securities, said sees scope for further upside in the index. "A close above this would mean that the Nifty can scale a new highs before the Prime Minister Narendra Modi unfurls the national flag at the Red Fort this Independence Day."
What should investors do now?
Experts recommend that investors should use all dips to 10,876-10,860 levels to buy into quality largecaps and midcaps.
“The Indian market is quite resilient on the back of strong domestic inflows into mutual funds. We are positive on the market and feel this upward trend may continue. Going forward, the Nifty has strong resistance around 10,950 levels. If it continues to trade above these levels, one can expect the index to hit a new high in coming sessions,” Anuj Shah, Head-Privilege Client Group, Reliance Securities, said.
Shah recommends that investors look at mid-caps that have corrected sharply in the last three months. “Investors waiting for a correction in equities for the whole of last year should definitely revisit their equity portfolio and start allocating a major portion to it. Everyone is staying out of mid-caps, but one should look at select midcaps which have corrected sharply in last three months.”He also advises one to hold and add select largecap private banks, autos and select pharma and cement stocks, which seems to have bottomed out for the long term.